Tesla Model 3

  • Nomura analyst and Tesla bull Romit Shah thinks Tesla’s focus on quality control justifies its sluggish Model 3 production ramp.
  • But quality control should be a given for Tesla, not an excuse.
  • 2018 will be the year when the Tesla bulls have their optimism tested.

Tesla missed badly on Model 3 delivery expectations for the fourth quarter, selling only 1,550 vehicles.

When the carmaker announced its numbers on Wednesday, it added in a statement that “[a]s we continue to focus on quality and efficiency rather than simply pushing for the highest possible volume in the shortest period of time, we expect to have a slightly more gradual ramp through Q1, likely ending the quarter at a weekly rate of about 2,500 Model 3 vehicles.”

That prompted Nomura analysts Romit Shah to offer some insight via a research note published Thursday.

“[W]e believe that Tesla is prioritizing quality control,” he wrote.

“While Tesla’s repeated guidance revisions could begin to risk damaging its elite brand, a mass-recall would probably be far more damaging. We believe that Tesla is (correctly) taking advantage of its unique beta testing ecosystem. Issues caught by early customers can be rapidly addressed by Tesla’s versatile assembly process.”

Shah is bullish on Tesla, with a target price of $500 per share (in trading Thursday, the stock had slipped 3%, to $309). But more is at stake than brand damage as far as Tesla’s exceptionally weak Model 3 rollout.

Quality control is a smoke screen

elon musk

The Model 3 was supposed to be designed for mass-production, and that process has been underway for half a year now (the vehicle launched back in July of 2017). Apart from the recognizable car parts of the car — the exterior features, the interior, wheels, brakes — the Model 3 isn’t that different from the larger and Read More Here